Taxation Law Assessment: Personal Income Tax and Insurance Needs

This assignment presents a comprehensive solution to a Taxation Law assessment, focusing on personal income tax and insurance needs. The assignment begins with the calculation of assessable income, incorporating gross salary and Australian sourced interest income. It then proceeds to determine allowable deductions, including teachers' union fees, phone and internet expenses, electricity costs, charitable donations, and superannuation contributions. Following this, the taxable income is calculated, leading to the determination of the tax payable, considering tax offsets like the private health insurance rebate and the low-mid income tax offset, along with the Medicare levy. The second part of the assignment addresses personal insurance needs, calculating current debts, financial needs, and future income requirements to estimate the necessary insurance coverage, recommending term life insurance, and detailing the benefits of life insurance, trauma cover, and income protection. The solution provides a complete analysis, incorporating relevant calculations and recommendations based on the provided scenario.

Running head: TAXATION LAW
Taxation Law
Name of the Student
Name of the University
Authors Note
Course ID

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Table of Contents
Answer to Part A: Personal Income Tax....................................................................................2
Requirement 1: Estimation of Assessable Income.................................................................2
Requirement 2: Value of Allowable Deductions...................................................................2
Requirement 3: Taxable Income............................................................................................2
Requirement 4: Offset............................................................................................................3
Requirement 5: Levies...........................................................................................................3
Requirement 6: Net Tax Payable...........................................................................................3
Part B: Personal Insurance Needs:.............................................................................................4
Answer to requirement A:......................................................................................................4
Answer to requirement B:......................................................................................................4
References:.................................................................................................................................6

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Answer to Part A: Personal Income Tax
Requirement 1: Estimation of Assessable Income
Computation of Assessable Income and Tax Payable
In the books of Francesca
For the year ended 30th June 2018-19
Particulars Amount ($) Amount ($)
Assessable Income
Gross Salary 107224
Australian sourced interest income 169
Total Assessable Income 107393
Requirement 2: Value of Allowable Deductions
Allowable Deductions
Teachers' union fees 1072
Phone and Internet 1460
Electricity expenses 3175
Charity donations 695
Superannuation contributions 7506
Total Allowable deductions 13908
Requirement 3: Taxable Income
Computation of Assessable Income and Tax Payable
In the books of Francesca
For the year ended 30th June 2018-19
Particulars Amount ($) Amount ($)
Assessable Income
Gross Salary 107224
Australian sourced interest income 169
Total Assessable Income 107393
Allowable Deductions
Teachers' union fees 1072
Phone and Internet 1460
Electricity expenses 3175
Charity donations 695
Superannuation contributions 7506
Total Allowable deductions 13908

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Total Taxable Income 93485
Requirement 4: Offset
As stated by the ATO an individual is permitted to obtain a private health insurance
rebate as the reduction in the value of private health insurance premiums they pay to the
insurer (Taylor et al. 2017). Francesca will be allowed to obtain a tax offset on the Private
health insurance premium rebate. The premium paid for private health insurance of $915 will
be eligible for tax offset.
Requirement 5: Levies
A Medicare Levy amounting to $1,869.7 will be levied at a rate of 2% on Francesca.
Requirement 6: Net Tax Payable
Computation of Assessable Income and Tax Payable
In the books of Francesca
For the year ended 30th June 2018-19
Particulars Amount ($) Amount ($)
Assessable Income
Gross Salary 107224
Australian sourced interest income 169
Total Assessable Income 107393
Allowable Deductions
Teachers' union fees 1072
Phone and Internet 1460
Electricity expenses 3175
Charity donations 695
Superannuation contributions 7506
Total Allowable deductions 13908
Total Taxable Income 93485
Tax on Taxable Income 22086
Add: Medicare Levy 1869.7
Less: Private health insurance 915
Less: Low Mid Income Tax Offset 975
Net Tax Payable 22065.7

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Part B: Personal Insurance Needs:
Answer to requirement A:
Computation of Insurance Needs
In the books of Francesca
For the year ended 30th June 2018-19
Particulars Amount ($) Amount ($)
Current Debts and Financial Needs
Mortgages 285000
Loans (Credit Cards & Car loans) 12955
Final Expenses (Funeral Expenses) 20000
Total 317955
Future Income Needs
Current Income 107224
The % Income needed by Survivor (75%) 80418
Subtotal 80418
The Number of years of income protection (25 Years) 25
Assumed interest rate 17.41
Emergency Fund 25000
Total income need by survivor 1400077
Total 1425077
Deduction of Assets
Cash and Savings 86500
Insurance Needs 1338577
Answer to requirement B:
To work out the right amount of cover needed by Francesca a computation of the need
analysis has been done. A recommendation can be given to Francesca of taking a term life
insurance (Woellner et al. 2016). This insurance will protect the family from the financial
stress in the event of Francesca death. Based on the adequacy of the Francesca current
accounts needs the life insurance will cover the income protection, total and permanent
disability, trauma and funeral insurance. The life insurance will provide Francesca with the
protection from the life-changing circumstances. In exchange of the financial security,
Francesca will be required to pay the monthly or the yearly fee which in other words is

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known as insurance premium. In case of Francesca, if anything goes serious or wrong such as
a serious injury, illness or death, it will help her and her family to cover the cost of funeral
and financially as well.
As in the current situation of Francesca life insurance has been recommended, it can
be suggested that the life insurance will cover death. The life insurance will help Francesca
by paying out her with a lump sum amount when they pass away (Barkoczy 2016). This
money will go the mother of Francesca whom she has nominated in her policy.
Francesca can also be recommended to avail the trauma cover. This insurance can be
considered critical for Francesca in case of suffering any kind of terminal illness (Sadiq
2019). If Francesca is diagnosed with the critical illness, such as the cancer then she can get a
lump sum as this will enable Francesca to pay for her medical and rehabilitation costs also.
Francesca under the life insurance policy is also recommended to take her income
protection. This will helps in providing her with approximately 85% of her work income. If
she is unable to work in future because of any serious injury or illness then 85% of
Francesca’s income will be covered under the income protection plan.

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References:
Barkoczy, S., 2016. Foundations of Taxation Law 2016. OUP Catalogue.
Sadiq, K., 2019. Australian Taxation Law Cases 2019. Thomson Reuters.
Taylor, J., Walpole, M., Burton, M., Ciro, T. and Murray, I., 2017. Understanding Taxation
Law 2018. LexisNexis Butterworths.
Woellner, R., Barkoczy, S., Murphy, S., Evans, C. and Pinto, D., 2016. Australian Taxation
Law 2016. OUP Catalogue.